Gazprom contractors post windfall profits in 2015 on extra pipeline work

10 August 2016, Week 31 Issue 893

Gazprom’s two biggest contractors saw a steep rise in earnings last year, defying the market downturn with the help of large orders for pipeline construction.

Stroygazmontazh, the gas giant’s top contractor, posted a 90% year-on-year increase in net profit to almost 29 billion rubles (US$495 million). Revenues, meanwhile, climbed by 24% to 279.5 billion rubles (US$4.8 billion).

Vedomosti reported last week that the company, owned by Russian businessmen Arkady Rotenberg, won 383 of the 489 projects it bid on in 2015. Most of the orders, which were worth a total of 191.1 billion rubles (US$3.3 billion), were connected with Gazprom. The largest among them was a construction contract for the Urengoi-Purpe gas condensate pipeline valued at 52.8 billion rubles (US$816 million). This was followed by a 47.8 billion ruble (US$738 million) contract to build the main section of the planned Power of Siberia pipeline to China. Gazprom intends to bring the trunk on stream in 2019, allowing it eventually to pump up to 38 billion cubic metres per year of gas from production sites in Siberia to China’s eastern seaboard.

Stroytransgaz, in second place among the producer’s contractors, saw a 170% increase in net profit to 10.5 billion rubles (US$179 million). This was on the back of an 80% rise in revenues to 188.3 billion rubles (US$3.2 billion). It received 200.9 billion rubles (US$3.4 billion) for orders in 2015, doubling the amount of the previous year.

The company’s largest order was for construction of a 94-km stretch of Power of Siberia linking the town of Lensk with the Saldykelskaya compressor station in Sakha Republic. The contract was worth 27.7 billion rubles (US$428 million).

Volga Group, owned by Russian oligarch Gennady Timchenko, owns 31.5% of Stroytransgaz, while Gazprombank holds a 10% stake.

 

Back in favour

Last year also saw Stroygazconsulting, Russia’s largest construction firm, return to favour with Gazprom after weathering two difficult years of limited orders from the gas giant.

It received 18.2 billion rubles (US$244 million) of contracts from Gazprom in the first quarter of this year, according to RBC.

The company, which had worked on Gazprom projects since its founding by Jordanian-born businessman Ziyad Manasir in 1996, received no new contracts from Gazprom in 2014 and orders worth only 20.2 billion rubles (US$345 million) in 2015, according to RBC. The company lost 5 billion rubles (US$140 million) in 2014 and faced creditors in court demanding 13 billion rubles (US$222 million) in 2015. Besides natural gas, the company has been active in real estate and road building.

In a 2014 article, Forbes Russia found no cause for the company’s decline, except “human envy”, as suggested by an unnamed source.

Stroygazconsulting’s fortunes turned after its purchase, on an equal basis, by Gazprombank and United Capital Partners (UCP) in April 2015. UCP, belonging to Ilya Sherbovich and partners, is best known for its role in wresting control of website VKontakte away from its founder Pavel Durov in 2014.

The company is now in a legal conflict with Transneft over dividends, demanding an additional 97.2 million rubles (US$1.5 million) after the decision was made to pay dividends on common and preferred Transneft shares at differing rates. Earlier this year, UCP sued so as to gain access to Transneft financial documents that revealed that the state company had lost about US$1 billion on deals it made with financial derivatives during the devaluation of the ruble in 2014.

Joseph Murphy

Edited by

Joseph Murphy

Editor

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